Palm Inc on Wednesday announced a lower-priced smartphone in the same family as its popular Palm Pre, although the move may be overshadowed by rival product launches by Motorola and Apple.

Palm said it will start sales of the Pixi, a candy bar-shaped multimedia handset with a full keyboard, ahead of the holiday shopping season. Like Palm's popular Pre, Sprint Nextel Corp will be the exclusive provider in the United States.

The price will be revealed later, Palm said, adding that the smaller and lighter Pixi would cost less than the Pre, which will be marketed as a premium product. Several analysts predict the phone will sell for $99 after rebates.

Separately, Palm cut the price of the Pre by $50 to $149, after a $100 mail-in rebate, for new customers that sign a two-year service contract.

The announcements failed to buoy Palm's shares, which fell about 5 percent after Credit Suisse analyst Deepak Sitaraman cut his rating on the shares to neutral from outperform.

He cited concerns about weaker-than-expected sales, and Palm's decision to stick with Sprint, rather than AT&T or Verizon Wireless, and the dearth of information about when Palm's new phones based on its WebOS operating system will make it to these carriers.

With the announcement of the new Palm Pixi to be launched exclusively at Sprint toward year end (we expected the device to launch with AT&T or Verizon), we believe our previous estimate of 10 percent smartphone share for Palm in 2010 at each AT&T/Verizon may now prove optimistic, given Pre/Pixi are unlikely to be promoted aggressively when they land at these carriers next year, he said in a client note.


For Palm, whose executive ranks include former Apple brass, the new phone may have to fight for attention in a week when two bigger rivals, Motorola Inc and Apple Inc, are also introducing new products.

Apple on Wednesday will update its iPod line in its annual fall preview for the holiday season. While the event is not expected to focus on Apple's iPhone, the event is likely to capture the attention of consumer electronics fans, including users of the iPhone.

That will be followed Thursday by Motorola's hotly anticipated announcement of new phones -- based on Google Inc's Android mobile software.

Still, investors in Palm, a pioneer of handheld devices that has fallen well behind competitors like Apple and BlackBerry maker Research in Motion Ltd, may have reason for optimism.

The Pixi may provide reason to trust that, unlike previous management, Palm's new bosses including Chief Executive Jon Rubinstein who helped create the iPod, can deliver on their promises to develop captivating products.

The industry is watching them and asking 'is Palm going to be able to deliver?' said Michael Gartenberg, an analyst for market researcher Interpret. They have done a very good job in doing so, and in capturing consumer mindshare or attention, he added. And mindshare, eventually, leads to market share.

Palm earned its share of negative sentiment in years past with product mishaps, such as the ill-fated Foleo portable computer, which was introduced with much fanfare only to be canceled months later. Questions remain about its ability to ramp up supplies of the Pre and grow sales in a world where the iPhone and BlackBerry already have millions of loyal users.

Rubinstein was brought in as Palm's executive chairman when private equity firm Elevation Partners bought a stake in the company in 2007, and he was named CEO in June. Elevation's co-founders include tech investor Roger McNamee, former Apple Chief Financial Officer Fred Anderson and singer Bono.

Shares of Palm, which is expected to report quarterly results next week, slipped some 5 percent to $14.23 in morning trade on Wednesday on Nasdaq.

(Reporting by Franklin Paul; Editing by Richard Chang, Dave Zimmerman)